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a fraternal benefit society that added a mandatory arbitration provision to insurance policies it had previously issued to its members has a right to compel arbitration, the 7th U.S. Circuit Court of Appeals held on Aug. 5. Hawkins v. Aid Association for Lutherans, nos. 01-4124; 01-4147; 01-4148. Three groups of policyholders filed putative class actions alleging that the Aid Association for Lutherans (AAL) engaged in fraudulent sales practices when it marketed insurance policies to them. AAL is a fraternal benefit society located in Wisconsin, which governs such organizations with a regulatory scheme based on a Model Fraternal Code. After the plaintiffs bought their policies, the bylaws were amended to include a mandatory arbitration provision, making binding arbitration the sole means of resolving any dispute with AAL. The three class actions were filed in state courts in three states, and AAL moved to compel arbitration in all cases. The suits were ultimately consolidated in a Wisconsin federal court, which granted AAL’s petitions to compel arbitration. The policyholders appealed. Applying Wisconsin law, the 7th Circuit affirmed the order to compel arbitration, agreeing with AAL that the mandatory arbitration provision was binding on the policyholders, despite its being retroactively added to the policies by way of the amendment to the society’s bylaws. The 7th Circuit found that the arbitration clause was not unconscionable, and that proper notice of it had been given to the policyholders.

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